U.S. markets rebounded on Friday's open but had a roller coaster ride to cap a volatile week.
The major indexes opened sharply higher following two days of massive selling pressure but lost momentum by midday with the blue-chips and the small-caps fading back into negative territory.
Both the Dow and the Russell 2000 regrouped to close higher, with the Nasdaq and S&P 500 holding gains throughout the session.
Volatility traded to a lower high than the previous session before settling below key levels of support into the closing bell while the market finished its worst weekly performance since March.
The Dow jumped 1.2% after testing an intraday high of 25,467.
Fresh resistance at 25,500-25,600 is in play as long as 25,400-25,350 holds with a close above 25,750 being a more bullish development.
The S&P 500 soared 1.4% following the run to 2,775 ahead of the closing bell.
Lower resistance at 2,775-2,800 held with a move above the latter possibly signaling a short-term bottom.
For the week, the Dow fell 4.2% while the S&P 500 sank 4.1%. Both indexes recovered their 200-day moving averages on Friday's rebound.
The Nasdaq zoomed 2.3% after testing an late session peak of 7,516.
Fresh resistance at 7,500-7,550 and the 200-day moving average held with continued closes above these levels signaling a near-term bottom.
The Russell 2000 closed higher for the first time in 7 sessions after adding 0.1% and tapping a session high of 1,567.
The May 1st low kissed 1,527 and the May 3rd bottom reached 1,532. Friday's midday low touched 1,530. A move below 1,525 could lead towards another round of selling pressure.
It is important to note the small-caps cleared the 1,700 level on the 12% rebound from early May into mid-June afterwards. However, the action on Friday was slightly bearish.
Tech was down 3.7% for the week while the small-caps gave back 4.7%.
Both the Nasdaq and Russell 2000 closed below their 200-day moving averages for a 2nd-straight session.
Technology and Communication Services showed the most sector strength after rising 3.2% and 2.2%. Consumer Discretionary and Health Care rallied 1.9% and 1.5%.
Utilities and Real Estate declined 0.1% and were the only sector laggards.
For the week, Materials and Industrials sank 6.7% and 6.4% while Energy dropped 5.5% to pace sector laggards.
There were no sectors that closed positive for the week.
Q3 results from 4 of the 97 Finance sector companies in the S&P 500 index were reported last week. These 4 companies account for 21.5% of the sector's total market capitalization in the index.
Total earnings were up 16.1% from the same period last year on 3.4% higher revenue growth, with 75% topping EPS and revenue estimates.
For the quarter as a whole, total Finance sector earnings are expected to be up 31.6% from the same period last year on 3.1% higher revenues.
This would follow 21.5% earnings growth in 2018 Q2 on 7.6% higher revenues.
Overall, for all sectors, total Q3 Q3 earnings are expected to be up 18.7% from the same period last year on 7.8% higher revenues.
Including the Financial sector, results from 24 S&P 500 members have total earnings up 21.2% from the same period last year on 9.5% higher revenues.
Global Economy - European markets showed continued weakness but with milder losses.
UK's FTSE 100, France's CAC 40 and the Stoxx 600 Europe slipped 0.2% while Germany's DAX 30 dipped 0.1%. The Belgium20 edged up 0.1%
Eurozone August industrial production rose 1%, doubling expectations of 0.5%.
ECB President Drahi said preserving openness in trade is crucial if the global economy is to thrive and secure its growth potential.
He added the positive developments in the Eurozone are not independent of the global growth momentum.
Asian markets rebounded to close higher across the board despite China's yuan trading to its weakest level in 18 months.
Hong Kong's Hang Seng's surged 2.1% and South Korea's Kospi jumped 1.5%.
China's Shanghai rose 0.9% and Japan's Nikkei added 0.5%. Australia's S&P/ASX 200 climbed 0.2%.
China September trade balance widened to a surplus of $31.69 billion, missing expectations for a narrowing to $19.20 billion. September exports rose 14.5% year-over-year, topping forecasts of 8.2%.
Meanwhile, September imports rose 14.3%, weaker than expectations of 15.3%.
The Japan August tertiary industry index rose 0.5%, topping estimates of 0.3%.
Import Prices rose 0.5% in September, while export prices were flat, both of which were better than forecasts for a rise of 0.2% and slide of 0.1%.
Consumer Sentiment fell 1.1 points to 99 in October, below expectations of 99.5, following the 3.9 jump to 100.1 in September.
The 12-month inflation gauge edged up to 2.8% versus 2.7% previously, but still slightly below the recent high of 3% in August.
Baker-Hughes reported the U.S. rig count was up 11 rigs from last week to 1,063, with oil rigs up 8 to 869, gas rigs higher by 4 to 193, and miscellaneous rigs down 1 to 1. U.S.
Rig Count is up 135 rigs from last year's count of 928, with oil rigs up 126, gas rigs up 8, and miscellaneous rigs up 1. The U.S. Offshore Rig Count was unchanged at 23 rigs and is up 3 rigs year-over-year.
New York Fed's Nowcast model shows Q3 GDP growth at 2.25% compared to 2.27% from last week, while Q4 is estimated at 2.77% from 2.80% previously.
Market Sentiment - Chicago Fed Charles Evans said he wasn't concerned about inflation and noted that fundamentals are really strong, with growth seen above trend and the jobless rate eying 3.5%.
He believes that continuing to adjust policy to neutral in the 2.75%-3% range makes sense, while a little inflation overshoot won't be problematic.
Evans said it's fair to question rate hikes, which is part of the debate, though the Fed is independent by Congressional charter and Powell is doing a good job about being accountable to the public.
He would like to see wage growth improved, while the low jobless rate should help draw folks back into the workforce.
Evans sees rising mortgage rates back above 5% on the 30-year fixed as a natural part of the transmission mechanism of Fed policy.
U.S. Treasury Secretary Mnuchin said U.S. fundamentals are strong and markets are not efficient, experiencing a normal market correction, adding sometimes they overshoot to the downside and upside.
Mnuchin also said specific markets may be hit by a soft patch as trade talks continue, but overall it would be positive for the U.S. economy. He went on to say that Fed Chairman Jerome Powell was doing a good job and understands the regulatory environment.
Mnuchin noted that President Trump will have a meeting with China's Xi at the G20 if its looks to be positive, but the U.S. would need to have concrete action items from China to resume talks.
The iShares 20+ Year Treasury Bond ETF (TLT) traded to a morning low of $114.28 with upper support at $114.25-$113.75 holding.
A close back below $113.50 would be a bearish signal for lower lows.
Lower resistance at $115-$115.50 held on the second half rebound to $115.01. A close above $116 would complete a v-shape recovery off the recent lows and be a more bullish development.
RSI is hovering around the 40 area and resistance from late September.
A move above 45 would signal additional strength for a possible run towards 50 and early September resistance.
Market Analysis - The Spiders Dow Jones Industrial Average ETF (DIA) snapped a 3-session slide following the run to $254.61. Fresh resistance at $254.50-$255 held with continued closes above $257.50 signaling a possible near-term bottom.
Additional and more important hurdles are at $259.50-$260 and the 50-day moving average.
September support is at $250-$249.50 and the 200-day moving average.
A close below the latter would be a bearish development for a continued backtest towards $247.50-$245 and mid-July support levels.
RSI is back in a slight uptrend with resistance at 35-40.
Support is at 30 with another move below this level signaling additional weakness towards 25-20 and August 2015 lows.
The Dow Jones Transportation Average ($TRAN) snapped a 6-session losing streak and closed higher for just the 2nd-time in 9 sessions after peaking at 10,599.
Fresh resistance at 10,600-10,650 held with additional hurdles at 10,800-10,850 and the 200-day moving average.
Short-term and shaky support is at 10,400-10,350. A move below the latter would be another bearish signal with risk to 10,200-10,100 and May/ June lows.
RSI is oversold with lower resistance at 25-30 holding on the attempted rebound. Continued closes above the latter would signal additional momentum towards 35-40.
Support is at 20 with a move below this level being a bearish development with risk to the 15 level and 7-year lows from August 2011.
The percentage of S&P 500 stocks trading above the 50-day moving average closed Friday at 15.07% with the high reaching 15.84%. Shaky support is at 10%-9.50% and is still in play with the intraday low reaching the latter.
Late February support is at 7.5% if 9.50% fails to hold on reoccurring weakness. Resistance is in the 13.75%-14.50% area and prior April/ May bottoms.
The percentage of Nasdaq 100 stocks trading above the 200-day moving average closed at 43.68% with the session peak reaching 45.63%.
A close back above resistance at the 45% level and April support would be a slightly bullish signal for higher highs.
There is risk to 31.50% level and the June 2016 low on a move below 36.89% and the prior session low.
All the best,
Roger Scott.